uploads/2014/12/micromill-advantage1.png

Why Micromill Technology Failed To Cheer Alcoa Investors

By

Updated

Alcoa’s Micromill technology 

In the last part of this series, we saw how Alcoa (AA) is making investments to increase its production capacity. It wants to produce aluminum for the automotive industry. Interestingly, primary aluminum production capacity decreased over the past few years.

Primary producers—like Alcoa (AA) and Rio Tinto (RIO)—reduced their smelting capacity. Century Aluminum (CENX) also indicated that it isn’t looking to expand its smelting capacity in the near future. Currently, AA and CENX are part of the SPDR S&P Metals and Mining ETF (XME).

Recently, AA launched a new manufacturing technique to produce aluminum. AA named the technique Micromill. It already patented this technology. First, we’ll discuss Micromill’s features.

Article continues below advertisement

Micromill’s key features

  • Automotive alloy produced through Micromill will be 40% more formable and up to 30% stronger than conventional aluminum.
  • Automotive parts produced with Micromill will be twice as formable and 30% lighter than parts made with high-strength steel.
  • Micromill technology can easily transition between producing sheets for the automotive, packaging, and industrial markets.

There’s a shortage of hot-rolled capacity to produce automotive sheets. Recently, Constellium (CSTM) acquired Wise Metals. Wise Metals is the third largest producer of aluminum can stocks in the world. CSTM plans to invest $700 million to transform part of the plant to produce automotive sheets.

Micromill failed to cheer investors

Micromill has been a breakthrough technology for AA. It conducted successful customer trials. It also secured a strategic development customer. However, this technology wasn’t greeted with much cheer from Wall Street. We’ll analyze the possible reasons in the next part of this series.

Advertisement

More From Market Realist